How technology affects wealth management business value


Thursday, January 24, 2019 | By Steve Leivent

How technology affects wealth management business value

While 2018 saw a slight downturn in wealth management merger and acquisition activity, the market was still quite robust. In its annual M&A summary, Fidelity reported 95 transactions across RIA and independent broker-dealer firms, with more than double the amount of AUM changing hands compared to 2017. Additionally, many firm founders and principals are approaching retirement age, not unlike their baby-boomer clients. In view of the industry’s changing demographics, increased competition, and mounting regulatory and economic pressures, it’s not surprising that many owners see this as an opportune time to reap the rewards of their life’s work. Conversely, acquiring firms see compelling economies of scale to be gained by absorbing assets into their existing infrastructure, along with the chance to bring experienced advisors on board in the face of a shrinking talent pool.

So how can firm owners make the most of this once-in-a-lifetime monetization opportunity? What can they do to maximize the value of their firms when it’s time to cash out? Some of the drivers of firm valuation are beyond the control of owners, but one is clearly not: technology.

Our new white paper, The Technology Impact on Business Valuation, illustrates how an investment in a state-of-the-art technology platform can pay itself back many times over in the form of higher firm value. Investment bankers and M&A specialists in the wealth management sector agree that technology is one of the key levers firms have to elevate their valuation. The right technology will not only help reduce operational overhead, but will also free up staff to focus on marketing and client cultivation, thus producing both cost savings and increased revenue potential.

Our latest whitepaper outlines the drivers of valuation and a typical scoring system M&A advisors use to arrive at a viable market price. Along with such factors as financial performance, the client base and quality of governance, business processes and operations also influence a firm’s overall score. A modern technology platform that leverages automation and integration to streamline workflows, drive efficiency and reduce operational risk can have a positive effect on a firm’s valuation – particularly if it is supported by a provider with a track record of innovation. Data integrity and well documented processes also ease the transfer of a firm’s business to new owners and the onboarding of new users.

Just how much price leverage can technology create? Download the whitepaper to see a scenario in which a firm with $1 billion in AUM can potentially increase its valuation by $5 million through technology-driven expense reduction.



Asset Management, Wealth Management


Theme picker